Russia: Where to Head in the Post COVID Economic Crash

Let us face it, the Western world's and its satellite's system of Debt-Finance driven paper growth was broken long before COVID showed up and gave it the coup de grace in the back of the head. The system was showing severe strains and creaking under its engorged weight in H2 2019 and Recession was in the air. It was the big white elephant in the room, about which only a few dared to talk to loudly.

COVID's arrival did two things: on the one hand, it turned what was apt to be a medium strength recession into a depression that may make the Great Depression look relatively mild and on the other hand it gave the politicians an excuse for all their 30 years of folly and self enrichment and thus a way out without changing anything. Additionally, it has presented the western central banks the opportunity to play out their latest insane theory: the Modern Monetary Theory...that is, print print print and its all good to print some more. Perpetual Quantitative Easing. A crack binge of epic proportions with a naive belief that nothing bad will arise from it. Ask the Romans how well that worked out for them, or the last Mongol dynasty of China. Two thousand years of history proves otherwise, but then again, History has ended, correct?

I wrote months before COVID lock-downs why anyone working remotely should already be living in Russia, it only makes economic sense. Now for the rest.

The West was already facing steep youth unemployment, with the US suffering in the 25-30% margin, many of the starter jobs having been taken either by illegal aliens, for the low skilled, or by H1Bs and automation for the higher skilled labor pool. Europe, even worse, with some EU members hitting the 50% mark. With COVID this will only get worse.

Russia is in a unique position. For one, it has a giant reserve of half a trillion dollars that is actually growing, due to the increase of the cost of gold, even as the government pulls funds to support the economy. The government has done a lot to make sure that Russia is well positioned to come out of this in one piece. The crisis has given feeder stock to many Russian industries, some created in answer to COVID that will feed industrial production in the years to come.

Additionally, with debt to revenue of 16% of GDP, as opposed to most Western nations of 80-150% and growing rapidly, and because of the endless anti-Russian sanctions, Russia is mostly immune from the crashing banking and tsunami of debt storms rolling down on these economies. The final plus is that the Russia lock-down looks set to serious lifting in mid to late May and in all will last only about 1.5 months, as opposed to the 2-3 month lock downs or longer in the West.

This of course means there will be greater opportunities in the Russian market for all those western unemployed engineers and scientists, well greater than sitting around on a bankrupt government dole.
Metallurgists, industrial engineers, mechanical engineers, electrical engineers are in extremely short supply and that considering that Russia graduates more engineers than any other nation, almost twice as many as second place America.  It is also huge and experts are needed.

With all of this, where do you think that venture capital is going to go? To bankrupt struggling western economies or to where it can still earn some semblance of a profit?

Finally, for those who fancy themselves social conservatives, Russia is definitely a go to place. Society is naturally conservative and old fashioned. More akin to the majority in the West in the 60s, 70s and 80s rather than the present. In other words, the good old days the present leading generations remember from their childhoods. Christianity is not frowned upon, it is celebrated. Getting on a plane or a public bus, one is apt to see icons of Christ or the saints on the dashboard of the driver or in the corner of the niche for the stewardesses. Like wise moderate Islam, Judaism, Buddhism, Shamanism, Catholicism can be found practicing in peace and without interference. Even in this COVID madness, the churches were never closed, because under the Russian constitution, the government has no right to interfere in religious matters.

In a roll of good news, the Russian government has continued to liberalize immigration policies. In a follow on article, I will outline just how easy it is for Americans to move to Russia and get citizenship.

Amongst other things, the requirement to give up the previous citizenship has been removed, effectively allowing duel citizenship for anyone who is not directly working for the government, in politics or working on secret projects. Additionally, anyone who has a spouse or child who is a Russian citizen no longer has to pass the Russian language test (though you will be hard pressed with work if you do not learn Russian) and the 3 year living in Russia requirement to put in for citizenship.

Next on the list is the reform of the Temporary and Permanent Residency programs. The order is to first get the Temp, which lasts 3 years and then put in for the Perm program. The Permanent Residency used to require reissue every 5 years but is now life long, as long as at least 183 days a year are spent in Russia. The cross hairs are now on the Temporary Residency which will be removed totally with everyone going directly to Permanent Residency.

Russian Highly Qualified Specialist work visas are also relatively easy to get, as long as you have a sponsor. In all, it takes less than a month to get the visa processed.

So if you have not wondered, you should be. If you have not planned, you should be. There is still a light in the middle of this bleak spring of despair.

You Work Remotely and Are Not Living in Russia?

Surely than you do not value your money or appreciate your own efforts.

 Now that I have your attention, lets deconstruct the Western myths and lies and discover why for remote workers, Russia is the optimum place to live.

 Lets begin with some life basics. Russia is not a frozen gray hellhole of unsmiling people, perpetual winter and vodka fuelled depression. I will deconstruct these myths in detail in a later piece. And while some villages and some remote provincial towns may look like that, the majority of the country is modern and filled with all the conveniences Westerns are used to. Go to any large grocery store and you will be hit by a selection of dairy, cheeses and meat products twice as large as the average American is likely to see in his life time in an average US supermarket. As for climate, Russia has everything from deep subtropics to frozen arctic, from sandy beaches to deep forests, from steppe to impenetrable mountains, so you get a wide variety of choices in that category too.

 But that aside, let us review things such as the costs of working or doing business. Just for starters, in the Ease of Doing Business Index for 2018, Russia rates in 31st place, up from 35th in 2017 and way up from the low score of 124 just 8 years ago. This puts Russia ahead of such heavy weights as France, 32, Switzerland, 38, Japan, 39, China, 46, US Puerto Rico, 64, India, 77, Brazil, 109.

 Lets go deeper, we will begin with taxes.

 If you are a resident of Russia and a tax resident (you spend at least 183 days in Russia) you pay low local taxes, which for most employees is 13% income and the rest the employer picks up. However, if you are working for yourself or with a very small staff, you can register with the tax authorities as an individualni predprinimatel (individual businessman). The simplified tax is 6% of income, plus gov insurance and pension taxes, which translates into approximately 7% taxes. Big difference from a US base tax starting in the 20% and up.

Now, if you are an American and spend less than 36 days in the US per year, your first $107,000.00 are US income tax free, so you only need pay the Russian 7%. Good deal or what? And filing those taxes is extremely simple, no need to hire expensive accountants or spend days over the tax programs.

Then there is the fact that your every day expenses will be half or less what you are used to paying in the US. For example, a phone plan with 10Gbytes internet, 100 texts and 1000 minutes will run you about $10, while a high speed cable internet connection with unlimited download will set you back on average $20. There are 4 major phone companies and an average of 5-10 ISP providers in any major city or town. Electricity and gas is dirt cheap.  For example, one kw of electricity will run you on average $0.06 and gas for heating is even cheaper.

 Rent, outside of Moscow or the first tier cities, will set you back about $200 for a 1 room apartment, $500 for a three room. Foreigners are also allowed to purchase none agricultural lands, so you could easily purchase an apartment or house. As a matter of fact, doing this is the fast way to help get you to the top of the list for residency.

To prove this point, I will compare below the cost of living in three American cities: NYC, Houston, Oklahoma City with three Russian cities: Moscow, St.Petersburg, Krasnodar. For this, I will use Numbeo.com

 NYC: Moscow
You would need around 2,879.43$ (187,874.03руб) in Moscow to maintain the same standard of life that you can have with 7,900.00$ in New York, NY (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).
NYC: St.Petersburg
You would need around 2,277.78$ (148,618.09руб) in Saint Petersburg to maintain the same standard of life that you can have with 7,900.00$ in New York, NY (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).

NYC: Krasnodar
You would need around 1,781.46$ (116,235.10руб) in Krasnodar to maintain the same standard of life that you can have with 7,900.00$ in New York, NY (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).

Houston: Moscow
You would need around 2,845.95$ (185,689.96руб) in Moscow to maintain the same standard of life that you can have with 4,300.00$ in Houston, TX (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).
Houston: St.Petersburg
You would need around 2,251.30$ (146,890.38руб) in Saint Petersburg to maintain the same standard of life that you can have with 4,300.00$ in Houston, TX (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).
Houston: Krasnodar
You would need around 1,760.75$ (114,883.85руб) in Krasnodar to maintain the same standard of life that you can have with 4,300.00$ in Houston, TX (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).
Oklahoma City: Moscow
You would need around 2,886.37$ (187,050.13руб) in Moscow to maintain the same standard of life that you can have with 3,600.00$ in Oklahoma City, OK (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).

Oklahoma City: St.Petersburg
You would need around 2,278.90$ (147,683.50руб) in Saint Petersburg to maintain the same standard of life that you can have with 3,600.00$ in Oklahoma City, OK (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).

Oklahoma City: Krasnodar
You would need around 1,782.41$ (115,508.23руб) in Krasnodar to maintain the same standard of life that you can have with 3,600.00$ in Oklahoma City, OK (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax).

And do not worry so much about Russian. Not only are english language menus and such available in most places in the larger cities, but the language itself is not nearly as difficult to grasp as you are led to believe. Sure you may need a few years of effort before you are reading Dostoyevskii in Russian, but you will grasp enough in half a year to live and get around, and if need be, hiring a part time translator is not expensive.
And finally, that costliest of all things for any American, the medical bills. Russia, like many European countries, has a dual medical system. The first is a government universal coverage that comes out of your and every other person’s taxes. This is available to all legal residents of Russia. Depending on what you need done and where you live on the quality of the service. Basic dental work or check ups will not require a long wait, more serious issues may and the further you are from the main cities, the worse the quality. The government is investing huge sums and providing incentives for doctors to move to small towns and villages, but this is all work in progress.
There is also the private sector, which for the most part, is high quality. There are of course quacks and crooks, like in any system, so buyer beware. But lets compare: the writer of this column had an infected molar, in which one of the roots rotted out and collapsed. The tooth was removed, all pieces of the root were removed, gum was opened up, drained and sewn up. All told, the cost was $90. In the US, the same operation costs $1,600 on average. An implant was put in the place of the lost tooth. The top of the line implant plus labour ran this author $550. In the US you will be lucky to escape with only $3-4,000. And so on and so on.
So, ready to make the life enhancing move you deserve? I will outline just how to do this, in the next instalment.